2025 (8) TMI 1302 - AT - IBC

Decision affirms section 60(5) IBC jurisdiction to enforce unchallenged arbitral award via resolution professional for recovery

Jindal Lifestyle Limited Versus Mr. Satyendra Sharma Resolution Professional of Arkin Creations Pvt Ltd., Ms. Deepika Jindal, Director of Appellant, Mr. Abhishek Poddar, Director of Appellant, Mr. Vijar Kumar Sharma, Director of Appellant, Ms. Sangeeta Prasad, Director of Appellant, Mr. Rajesh Mohata

NCLAT (PB, New Delhi) dismissed the appeal, holding the Adjudicating Authority had jurisdiction under section 60(5) of the IBC to entertain enforcement of ... Jurisdiction - power of the Adjudicating Authority to deal with claims of the Corporate Debtor under CIRP against the Appellant arising out of an Arbitral Award - HELD THAT:- It is pertinent to understand that IBC is a self-contained code which intend for timely resolution of the Corporate Debtor. It is further well settled principal that the proceedings under the Code are time bound and several judicial fora including this Appellate Tribunal and Hon’ble Supreme Court of India have held in catena of judgements that strict timelines are lifelines for revival of the Corporate Debtor. Prima-facie, if the contentions of the Appellant are accepted that the Respondent No. 1 should have gone to the civil court, then no one can assess as to how much time the whole process is going to take before the Arbitral Award is implemented and finally the decree which is challengeable at several layers of the judicial fora is executed in favour of the Corporate Debtor. From reading of Section 60(5) of the Code, it becomes clear that once the Adjudicating Authority is required to deal any matter brought before it, which is within the domain of the Code, no other forum have any jurisdiction to entertain such proceedings. Taking into this consideration, it is found that the Adjudicating Authority was well within rights to entertain the relevant IA filed by the Respondent No. 1 regarding enforcing the Arbitral Award. It is admitted fact that the Arbitral Award was indeed issued and the same has not been challenged by the Appellant, thus, the Arbitral Award has attained the finality and the same need to be prosecuted by Respondent No. 1 being Resolution Professional of the Corporate Debtor in order to help in revival of the Corporate Debtor. The Adjudicating Authority is also required to exercise its powers under section 60(5) of the Code to direct the judgment debtor in respect of Arbitral Award to pay the determined amount under the Arbitral Award. There are merit in the contentions of the Respondent No. 1 that 90 days’ timelines prescribed under MSME Act, 2006 for Arbitrator is not mandatory and non-compliance and delayed submission of Arbitral Award cannot be a ground to treat the Arbitral Award a nullity and we tend to agree with the same. There are no error in the Impugned Order - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Adjudicating Authority exercising jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code (Code) can entertain proceedings to enforce or give effect to an arbitral award against a party during the Corporate Insolvency Resolution Process (CIRP), or whether enforcement lies exclusively before a civil court under Section 36 of the Arbitration and Conciliation Act, 1996. 2. Whether the arbitral award in question is a nullity by reason of non-compliance with the 90-day timeline under Section 18(5) of the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act, 2006) or for failure by the sole arbitrator to submit the report to the Facilitation Council as required by relevant rules. 3. Whether the arbitral award is unenforceable or barred by limitation under the Limitation Act, 1963, including whether limitation runs from the award date or from receipt/knowledge of the award. 4. Whether procedural defects asserted by the respondent (including alleged non-service leading to ex parte award and insufficient stamping) render the award inadmissible or a nullity in insolvency proceedings before the Adjudicating Authority. ISSUE-WISE DETAILED ANALYSIS Issue 1: Jurisdiction of the Adjudicating Authority under Section 60(5) of the Code to entertain enforcement of an arbitral award during CIRP Legal framework: Section 60(5) of the Code confers exclusive jurisdiction on the Adjudicating Authority to entertain or dispose of any application or proceeding by or against the corporate debtor, any claim made by or against the corporate debtor, and any question of law or fact arising out of or in relation to insolvency resolution or liquidation proceedings. Section 238 of the Code provides that the Code overrides inconsistent provisions of other laws. Precedent treatment: The Tribunal relied on prior appellate decisions holding that the Code prevails over the Arbitration and Conciliation Act where conflicts arise and that time-bound resolution under the Code requires consolidation of claims before the Adjudicating Authority. Interpretation and reasoning: The Court construed Section 60(5)'s non-obstante clause as vesting exclusive jurisdiction in the Adjudicating Authority to adjudicate claims falling within the ambit of CIRP, including claims arising from arbitral awards related to the corporate debtor. The Court emphasized the Code's objective of time-bound revival and the impracticability of requiring resolution professionals to pursue separate execution in civil courts, which would undermine timelines and coherence of the CIRP. Ratio vs. Obiter: Ratio - The Adjudicating Authority has jurisdiction under Section 60(5) to entertain proceedings to enforce an arbitral award against the corporate debtor during CIRP, and Section 238 ensures the Code prevails over conflicting provisions of the Arbitration Act for matters within the Code's domain. Conclusion: The Adjudicating Authority was competent to entertain and grant relief in the IA enforcing the arbitral award; the contention that enforcement must be pursued exclusively under Section 36 before a civil court was rejected. Issue 2: Validity of the arbitral award vis-à-vis timelines and procedural requirements under the MSME Act, 2006 (Section 18(5) and related rules) Legal framework: Section 18(5) of the MSME Act prescribes that the arbitrator shall furnish his report within 90 days of reference; relevant facilitation council rules indicate submission procedures to the Council. Precedent treatment: The Tribunal noted High Court decisions and other appellate precedents treating the 90-day timeline as directory rather than mandatory, holding delayed awards may not be rendered void ab initio absent prejudice. Interpretation and reasoning: The Court accepted the view that the 90-day period under the MSME Act is procedural/directory; non-compliance with the timeline or non-submission to the Facilitation Council does not automatically invalidate or nullify an award, especially where the award has not been challenged and has attained finality. The tribunal observed that treating such procedural lapses as fatal would frustrate substantive adjudication and the Code's objectives. Ratio vs. Obiter: Ratio - Non-compliance with the 90-day timeline under Section 18(5) of the MSME Act does not render an arbitral award a nullity for purposes of insolvency proceedings where no challenge to the award's validity has succeeded and no prejudice is shown. Conclusion: The arbitral award was not a nullity on the ground of delay under Section 18(5) or on the basis that the sole arbitrator did not submit the report to the Facilitation Council. Issue 3: Limitation - commencement of period for execution and enforceability of the award Legal framework: Article 136 of the Limitation Act prescribes limitation for execution of a decree; jurisprudence holds that limitation for execution runs from the date the award becomes enforceable. Precedent treatment: The Tribunal referred to appellate and Supreme Court authority indicating the period for execution begins when an award becomes enforceable, not from knowledge or receipt by the judgment-debtor. Interpretation and reasoning: Applying the settled principle, the Court held that limitation for executing the award runs from the date the award became enforceable, and a 12-year execution limitation period had not expired in the present facts. The Appellant's argument that receipt in 2023 affects limitation was held immaterial. Ratio vs. Obiter: Ratio - Limitation for execution of an arbitral award runs from the date the award is enforceable; absence of earlier enforcement steps by the award-creditor does not bar enforcement within the prescribed period. Conclusion: The award was not time-barred; limitation did not preclude the Adjudicating Authority from acting in CIRP to give effect to the award. Issue 4: Procedural defects - ex parte proceedings, service, and insufficient stamping of the award Legal framework: Principles of natural justice and service under the Arbitration Act; Stamp Act provisions on admissibility of unstamped/insufficiently stamped documents; jurisprudence on treatment of unstamped instruments in insolvency proceedings. Precedent treatment: The Tribunal considered precedent indicating that unstamped or insufficiently stamped documents may be admissible in insolvency proceedings and that stamping defects can be curable; authorities were cited showing NCLT/NCLAT's pragmatic approach to admissibility in the IBC context. Interpretation and reasoning: The Court observed no successful challenge showing prejudice from alleged non-service that rendered the award void ab initio. On stamping, the Tribunal accepted that insufficiency is curable and does not preclude the Adjudicating Authority from admitting the award in CIRP. The overarching concern for timely resolution weighed against permitting technical defects to defeat admitted claims without substantive challenge. Ratio vs. Obiter: Ratio - Procedural defects such as delayed service or insufficient stamping do not necessarily render an award unenforceable in insolvency proceedings; such defects may be curable and do not deprive the Adjudicating Authority of jurisdiction to entertain the claim under the Code. Conclusion: Allegations of procedural infirmity and stamping insufficiency did not invalidate the award for purposes of enforcement in the CIRP; the impugned order admitting and acting upon the award was upheld. Final Disposition (Court's conclusion as applied to issues) The Court found no error in the Adjudicating Authority's order admitting and enforcing the arbitral award in the CIRP. The appeal was dismissed as devoid of merit; the Adjudicating Authority was held competent under Section 60(5) and Section 238 to deal with the award, and challenges based on MSME timelines, limitation, service, and stamping were rejected on the facts and law outlined above.